How to Accept Credit Card Payments in 6 Easy Steps

When it comes to accepting credit card payments, you have to do a few things first. You need the proper merchant account, software and any other required hardware in order for your business to be legally able to accept payment cards. The following guide will help walk you through that process step by step.

To take credit card payments, you must first establish your payment processing requirements, then understand the expenses associated with credit card payments, before selecting a processor and merchant account. You’ll also need to choose hardware if you’re selling in person. We’ve broken down the procedure into six easy stages so you can get started right away:

Step 1: Identify Your Payment Processing Requirements

Finding out what your payment processing requirements are is one of the first things to take when opting to accept credit card payments. The optimal processor for your company will be determined by how you want to take online payments, whatever tools and systems you currently have in place (consider connectors with your existing website or other tools like accounting or CRM software), and the size of your company.

We’ll go through several instances where you can take credit cards and contactless payments in the sections below:

In-Store

Accepting credit card payments has a cost, which varies based on the processor you use.

It’s easy to dismiss credit card processing as a waste of money. In 2020, however, more than two-thirds of North Americans picked credit and debit cards as their preferred in-store payment option. As a result, becoming cash-only severely reduces your prospective consumer base.

If you have a physical shop, the first thing you’ll need is a merchant account, which is a sort of commercial bank account that can scale with your company and manage your payment processing traffic.

Aggregate payment service providers might be useful if you’re starting a new firm. However, after you’ve built a firm that processes more than $5,000 per month, a merchant account will provide you with the greatest value and stability. We’ll go through various payment service providers in further depth later, but here are our top picks:

• Square is the best option for new and mobile enterprises as well as individuals.
• Payment Depot: For established firms, the cheapest credit card processor is Payment Depot.

Mobile

If your company is always on the go, selling at markets, events, and pop-ups, you should look for processors that offer a mobile app. Many processors that provide a mobile POS (mPOS) also take digital payments from mobile devices in addition to credit cards.

In 2020, digital and mobile wallet payments were the most common POS payment methods worldwide, and by 2024, they are expected to grow even more. As a result, it’s worth looking for a processor that can handle NFC (near-field communication) or even QR code payments in addition to traditional chip cards.

Small mobile card readers will be offered by mobile payment processors, which are generally more adaptable and inexpensive than standard countertop terminals. Some may even throw in a free magstripe processor, but for further protection, you’ll need a chip and an EMV contactless reader.

The following are the finest mobile payment processors:

• Square is the best mobile payment processor overall.
• PayPal is the best option for one-time sales.
• Clover is the best option for integrating a merchant account that already exists.

Online

Accepting credit cards in-store and through a mobile app with a credit card reader is rather simple. However, there are almost a million distinct methods to handle credit card transactions online—the most common being online shop or eCommerce platform checkout, invoicing, and payment forms. You’ll also want to think about curbside pickup, which allows customers to purchase and pay online but pick up the merchandise in your store.

Digital wallets like Apple Pay are expected to account for more than half of all online purchases in the next four years. The following are some of the greatest online payment processors:

• Stripe is the best online payment processor in general.
• PayPal is the best option for receiving PayPal payments and facilitating one-click checkouts.
• Shopify: The best online shop with the best deals Pay at the Store

There are a few more items to consider when processing card payments, whether you want to concentrate on in-store, mobile, or internet sales.

• Chargebacks happen when a customer’s credit card issuer agrees with the customer in a charge dispute (such as fraud accusations, non-arrival of products, damaged items, and so on) and deducts money from your merchant account to reimburse the charge. If you have a significant number of chargebacks, you risk incurring increased processing costs or having your merchant account suspended entirely.
• Recurring payments are necessary if you have a subscription-based business model, memberships, or a corporate billing schedule. Setting up regular payments may save time and money while also reducing the risk of human mistakes. You may also be able to set up periodic ACH payments rather than credit card payments, which will save you a lot of money on processing costs. Check to see whether your payment processor provides this option.
• Offer consumer financing alternatives: Even though you take credit cards, some customers might like to utilize financing options like buy-now-pay-later (BNPL) or installment payments, which you can set up with firms like Klarna, PayPal, and AfterPay. Processing finance payments have transaction costs that are comparable to those charged by credit cards, but it may help you boost your conversion rate and average order value.

Step 2: Recognize the Costs of Credit Card Payment Processing

Interchange-plus, flat-rate, tiered, and subscription pricing schemes are used by credit card processors. We’re talking about interchange and payment structure costs here; we’ll go into company-specific processing fees in the next section when we analyze their benefits and drawbacks.

Plus-Interchange Pricing

The costs charged by a merchant bank account for accepting card payments are known as interchange fees. The amount charged is determined by the kind of card used and the transaction is completed.

In this sense, the Plus-Interchange Pricing model is the margin percentage your payment processor will charge for each transaction on top of the variable interchange rate.

This price system may seem perplexing at first, but it may save high-volume businesses money by allowing them to make payments that are qualified for a reduced interchange rate.

Pricing on a fixed basis

Pricing on a fixed basis is a set processing fee for all payments—the fee amount remains the same regardless of the transaction amount. Many small businesses like the simple and predictable nature of pricing on a fixed basis.

For example, a corporation may charge a flat price of 3% on all of your transactions, which includes the interchange fee, the processor’s margin, as well as branding, and other ancillary services.

It’s simple to comprehend, and you won’t be surprised when you get your bills since you know exactly how much you’ll be charged. However, simplicity comes at a price. Any potential savings from transactions that are eligible for reduced interchange fees are lost if your processor charges a flat cost. Furthermore, flat fees might add up quickly if you make large-ticket transactions.

Differentiated Pricing

Differentiated Pricing is very common in the US and involves having lower qualified rates for certain cards or transactions and higher non-qualified rates for others.

A lot of small businesses will sign up for a contract with a processor with these low fees in mind, but end up paying more than they thought because of the small number of qualified major credit cards and associations (like American Express, Visa, and MasterCard). With Differentiated Pricing, you’re largely at the mercy of the processor—they can determine what makes a qualified and non-qualified purchase and choose whatever rates they want to set for each. Debit cards typically have the lowest fees in this pricing structure, while high rewards credit cards have higher processing rates.

If you have a clear understanding of the sorts of cards your clients most often use, a tiered strategy might work to your advantage. However, since this approach might be too uncertain for most small enterprises, we don’t suggest it.

Subscriptions

Payment processing businesses have begun to provide a monthly charge subscription-based strategy in recent years.

Other services, such as software, tax services, affiliate networks, and mailing list capabilities, are often included in this sort of price structure in addition to basic money processing. Most crucially, if you pay a higher monthly membership, several of these services have no transaction costs.

It’s up to you to decide if the additional services and fee-free transactions are worth the recurring cost vs having no additional cost but transaction costs from one of the other pricing models.

A payment gateway service will be included by the great majority of payment processors. It’s doubtful that you’ll need to pay for one separately, but it’s always a good idea to double-check.

Step 3: Select a Payment Processing Service

Now it’s time to choose a payment processor, which is the most exciting aspect.

Payment Processors with the Best All-Around Ratings

If your firm is multichannel, you may want to go with a payment processor that can handle a variety of transactions rather than one that specialized in one. To fully analyze various processing costs, make sure you have a thorough understanding of your cash flow.

The following are the greatest all-around choices:

• Square is the best merchant solution for small companies in general.
• Payment Depot provides the most cost-effective merchant services for established companies.

You may accept credit card payments in person and online with Square, and there are no monthly, cancellation, or setup costs (unless you want to buy a card reader). As a result, it ranks first among the finest merchant services for small companies on our list.

Fees vary from 2.6 percent plus 10 cents to 3.5 percent plus 15 cents for every transaction. Alternatively, for ACH bank transfers, 1% with a minimum of $1 per transaction for online transactions (via invoices only). It is one of the most advantageous solutions for new and small enterprises.

Square also offers a low-cost card reader for $49 and a $299 portable terminal (which prints receipts). Alternatively, for $1,349, you may get a complete POS register setup.

Customer management, online stores, virtual terminals, invoicing software, reporting, and more are all included in Square’s entire suite of company administration solutions.

Payment Depot is one of the cheapest credit card processors on the market if your company processes more than $10,000 in sales each month.

It charges Interchange plus 5–10 cents each transaction, depending on your plan, and a $49–$199 monthly cost. Payment Depot stands out since its rates are the same whether you pay online or in person, while most other firms charge extra for online transactions.

One membership with Payment Depot includes Plus-Interchange Pricing for card-present, online, virtual terminal, and mobile payments.

Step 4: Create an account with a merchant services provider.

You’ll need to apply for and set up a merchant services account to accept credit card payments (unless the payment processor offers one as part of its service, like Chase, or doesn’t need one to be set up separately, like Square).

A merchant account serves as a link between your business account and the customer’s bank account, allowing money to be sent before the payment is approved and transferred to the company account for withdrawal.

You’ll need to establish you’re a real company and produce the following documentation as part of your application to acquire a merchant account via a bank:

• Information about your business’s bank account
• Statements of Income
• Obtain a business license
• A physical address is required.
• The number assigned to the employer
• Incorporation documents
• Compliance with the Payment Card Industry
• Other papers that may be required include company plans, marketing materials, and more.

After you’ve completed the paperwork, you’ll be able to look for accounts that best suit your needs.

Consumers used cash for just 26% of all payments in 2019, according to the Federal Reserve’s Cash Product Office, with the remainder made up of debit cards, credit cards, prepaid cards, and electronic payments (such as Apple Pay). Accepting credit card payments is a must-have in today’s consumer landscape, whether you own a brick-and-mortar store, a farmers market stall, or an internet company.

Step 5: Setup Your Hardware

If you’ve picked a payment processor that includes hardware for your in-person POS system, now is the time to get everything set up.

This phase varies depending on the sort of system you buy, but most follow a similar pattern. As an example, we’ll utilize Square’s POS hardware.

To utilize a tiny NFC card reader, just connect it to your smartphone through Bluetooth and launch the reader’s app; then use the POS app to begin processing payments.

Small card readers, such as Square’s contactless reader, need just that your smartphone is associated with them.

You’ll need to switch on the Square Terminal (and most other standard card terminals), connect it to the internet through Wi-Fi or ethernet wire, and then load your receipt paper.

You’ll need to connect a power supply and the internet whether you’re using a standard card terminal or a portable touch-screen terminal like Square’s.

You’ll next need to login into your account (either on the terminal itself or on the connected POS for other terminal providers). You’ll also want to create your inventory goods for them to display on your terminal, which you can do in-app or online if you haven’t previously.

Step 6: Put Your System to the Test

Square (and many others) doesn’t provide a training mode or live preview that you can utilize to evaluate whether your system is working properly. You can generally confirm that the connections are all working inside the terminal settings using other more conventional terminals and POS systems.

You may perform a modest transaction, like $1, and then return the money when the test is over with Square and others that don’t particularly provide training options. Just keep in mind that certain providers may not allow you to recoup transaction costs.

Online suppliers, such as Shopify, are often simpler to test since they give test modes, a “bogus gateway,” or pre-programmed “dummy cards” for testing.

Conclusion

Whether you need to collect payments in person, online, or via a virtual terminal, having the capacity to accept credit cards is a necessity for any business. Accepting credit cards might be simple to set up. The difficult thing is knowing you’re getting a decent deal and joining up with a firm that can help you out.

If you’re starting a company, Square’s POS software, Square Online’s free shop, or Square Invoices provide a cheap and rapid solution to take credit card payments in person, online, or through Square Invoices. Square’s flat-rate fees are clear and affordable for small companies and infrequent sellers.

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Frequently Asked Questions

What is the easiest way to receive a credit card payment?

A: The easiest way to receive credit card payments is by using a processor that has an association with your business. A good example of this would be PayPal, Stripe, and Square Pay.

How can I accept a credit card payment from someone?

A: You can accept credit card payments by creating a new merchant account with your bank that has the ability to handle this kind of transaction.